2 september 2024 Jan Knaak, Henrik Ørskov
Market Trends for Stainless Steel
Welcome to the latest market insights from Damstahl, where we delve into the dynamic world of stainless steel trends. You will get a closer look at the current market development and be updated on the situations within price development, energy and transportation as well as the availability of the different product groups.
General Market Trend
Over the past weeks, we have seen a market that has been rather quiet and, therefore, generally showing less activity. Especially the German economy presents a bleak picture since the expectations for the economy have been revised, unfortunately downwards. The weaker market figures from the US and China put pressure on the strong export-dependent German economy. Additionally, for the rest of the Eurozone, the expectations aren’t very optimistic. Let’s take a more detailed look at the situation for the stainless-steel industry in this newsletter.
Raw Materials
Nickel (LME 3 month)
In our last market newsletter, we reported a strong Nickel value of approximately $21,000/ton by mid-July. Checking the figures today (28.08.24), we’re seeing a much lower value of approximately $17,000/ton, with the lowest point around $15,400/ton in the meantime. This, of course, has put a lot of pressure on the alloy surcharges, which have been decreasing recently. The reason for the weakening in Nickel could be several factors without being able to point out one. It seems that the long-expected shortage of Nickel Class 1 will not materialize since the stocks at LME are increasing continuously.
Chromium
For Chromium, we’re still awaiting a new pricing system after the publication of the benchmark price was stopped in May by Merafe Resources. You can read in the press that they’re currently working on an optimized mechanism, but nobody is aware of how this could potentially look.
Ferromolybdenum
Ferromolybdenum was reported with a value of approximately $48,000/ton in our last market trend from April, while it peaked at around $57,000/ton in the meantime. By the end of August, we can see Ferromolybdenum being priced around $49,500/ton, which brings it down to a similar price as reported in April. This price very much reflects a seasonal behavior of Ferromolybdenum, going hand in hand with the quieter summer season.
Energy Costs
Even though we’re still within the summer season and natural gas is less required due to warm temperatures, we can see a slight increase in the price for natural gas at around €38.60/MWh – with an expected further increase due to a pipeline agreement between Russia and Ukraine running out after five years. This increases the uncertainty of the energy supply in Europe since Asia is requiring huge amounts of LNG and Europe simply has no real negotiation powern LNG yet, with most of the demands being imported from the US or Norway.
Freight Situation
Road
We are now all back to normal operation after the generally lower activities due to summer holidays in Europe and the Nordic countries. Right now, the balance between demand and capacity still seems stable. Especially in the past two weeks, the oil surcharges have dropped, which has a significant effect on the road sector. We are about to face the peak season, which always puts extra pressure on the price level and capacity.
Sea freight
Finally, we are seeing things loosening up again after the Red Sea situation started. The SCFI freight index (Far East import) has seen a minor drop in the past weeks. We also see that it’s getting easier to get a confirmed schedule.
The peak season started earlier this year for various reasons, mostly because of an uncertain market where nobody knew the impact of available capacity, and for sure, also the ongoing cost increases. On top of that, China launched electric cars to the European market, which also had a significant effect on the demand. All in all, the peak season seems to have peaked, which is why the industry has lower demand now.
So, even though we still have a way to go before we are back to a more acceptable situation, this is still a very positive development.
Scrap
The scrap prices have been stable over the last months, unlike the raw materials reported. The small decrease we’ve seen in the price for stainless steel scrap can only be explained by lower demand in Europe and the downsized activities in the European mills due to the summer season. Again, we would like to highlight that scrap plays a key role in the green agenda for the stainless-steel industry and will therefore become a critical raw material over time.
News on Products
Bars
The supply situation for bars in general is very stable at the moment. We can see stable prices and lead times for both materials coming from Europe and Asia. Both sources report weak demand and have capacities for quick deliveries, while from Asia we always have to consider the quotas.
Tubes (Seamless)
Within seamless tubes, the supply situation also remains stable. We can see rather short delivery times coming from European producers, while the delivery time out of India remains stable at 6 – 8 months. All in all, we have a really good and steady supply situation.
Tubes (Welded)
After the holidays, there is relatively low activity in Europe in general, bearing in mind that there is still an industrial holiday in the southern part of Europe. In the Nordics, there is still good activity in the food and pharma sectors. Our Italian pipe manufacturers already have good stocks of finished goods, and this means full availability and short delivery times for projects as well. Our Asian partners continue to report low activity, so here we also have a good opportunity to get space for various project orders, and with a falling freight rate, this is not uninteresting.
Sheets
With all European mills active again, there is full availability of the total capacity. Acerinox is up and running at 100% again and has had their entire backlog from the strike period settled. It is still too early to say what the real demand/activity level in Europe looks like. We can ascertain that there is still available capacity for October deliveries. It will be interesting to follow what happens with imports from Asia after a decision has been made by the EC in connection with anti-dumping and anti-subsidy duties on cold-rolled plates and coils from Indonesia exported to the EU via Taiwan, Vietnam, and Turkey.
Fittings and flanger
The Red Sea incident impacted our supply chain from Asia, but the situation is now improving. Production timelines in Asia remain consistent, ensuring the reliability of our supply chain from this region. Meanwhile, delivery times from European suppliers for stock materials remain unchanged. However, we have observed extended production times for larger diameter fittings over the past few months, leading to longer delivery times in this specific product area.
Regarding pricing, although we anticipated increases due to rising raw material costs, the market has instead experienced a price correction. As a result, the expected price hikes for fittings and flanges did not materialize. Some suppliers attempted to push prices higher, but overall, the market has remained stable. Given the current raw material cost situation and the absence of any significant price increases, we do not foresee any imminent changes in pricing.
Aluminum and Copper
The prices of aluminum and copper fell by more than 5% over the summer. Poor production figures and rising unemployment in China put pressure on prices. In addition, the Chinese government, contrary to expectations, has chosen not to support raw material production. However, prices have stabilized and have started to rise again towards the end of August.
Aluminum
After months of low production in China, production is increasing again. This resulted in the price of aluminum being reduced by $300/ton in July. The low prices have continued into August but have moved towards the end of August and are now trading at approximately $2,490/ton.
Copper
Throughout July, copper has dropped from $10,000/ton to $8,850/ton at the end of July. Prices have corrected and are currently trading at $9,100/ton. There is still a great deal of confidence that the prices of copper will rise to over $10,000/ton again. The demand for the green transition is greater than the production capacity. We therefore assess that the falling price is simply an expression of the nervousness due to the poor Chinese production figures.
Price Development
Since our last market trends, we have seen slightly increasing prices in the stainless market. This is now being replaced by stagnant to slightly falling prices over the coming months despite a forecast of a rising nickel price. The biggest and most decisive factor is still the level of activity and thereby demand in general, and therefore we cannot say anything yet about what level we will set in the coming months.
Conclusion
We experience a hesitant or anticipatory approach from several of our customer segments. This is also confirmed by the Eurozone Manufacturing PMI, which dropped to 45.6 in August 2024, the lowest in 8 months. While we see great activity levels in other segments/industries, it’s still way too early to make any conclusions with some of the biggest member countries in the EU still on vacation.
We hope that the anticipated interest rate reductions from both the US and EU will have a positive impact on the general activity level. Therefore, we also believe in the global PMI forecast from JP Morgan with an increase for Q4-2024. We have good availability at our stocks, and with our two brand new high bays up and running, we’re ready to serve all needs with short delivery times and high service levels.
Do you want to know more?
Henrik Ørskov
CPO & Supply Chain Director, Nordic
hoe@damstahl.com
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